Real estate construction projects are being cancelled. Consumer confidence is waning. Auto sales are tanking. There are worries about rising unemployment. The government is considering a major stimulus package. In China:
Just as China attained supercharged growth that astounded much of the world, it appears to be slowing more sharply and more quickly than anyone anticipated.
“It’s tough to be optimistic,” said Stephen Green, an economist at Standard Chartered Bank in Shanghai. “The three engines of growth — exports, investment and consumption — have all slowed down.”
The signs are so troubling that last week Prime Minister Wen Jiabao warned that this year would be “the worst in recent years for our economic development.”
It’s prudent to take Chinese government economic reports with a generous helping of salt but, when they admit that growth is slowing from the blistering 11% they saw in 2007 to a more modest 5.8% predicted for the fourth quarter of 2008, I believe them.
The cooling of the formerly red-hot Chinese economy follows declines in retail activity here and in Europe with attendant declines in orders for Chinese goods. 60% of China’s economic growth is based on exports and as demand for China’s goods slows, so does their growth. I’ve been saying for years that just as the U. S. needs to rely less on consumer spending for its prosperity so China needs to cultivate a domestic market to continue its economic growth. We’ll see what the effects of our respective failures to behave more prudently may be.
There was one item in the article cited above which gave me some foreboding: part of the stimulus package under consideration in China would be increased subsidies for exporters. Good for consumers here, very bad for producers of consumer goods here and the people employed by those companies.